EXHIBIT 99(g)(2)
SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT dated as of February 21, 2003, between BlackRock Preferred
Opportunity Trust, a Delaware statutory trust (the "Trust"), BlackRock Advisors,
Inc. a Delaware corporation (the "Advisor"), and BlackRock Financial Management,
Inc., a Delaware corporation (the "Sub-Advisor").
WHEREAS, the Advisor has agreed to furnish investment advisory
services to the Trust, a closed-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Advisor wishes to retain the Sub-Advisor to provide it
with certain sub-advisory services as described below in connection with
Advisor's advisory activities on behalf of the Trust;
WHEREAS, the advisory agreement between the Advisor and the Trust,
dated February 21, 2003 (such agreement or the most recent successor agreement
between such parties relating to advisory services to the Trust is referred to
herein as the "Advisory Agreement") contemplates that the Advisor may
sub-contract investment advisory services with respect to the Trust to a
sub-advisor pursuant to a sub-advisory agreement agreeable to the Trust and
approved in accordance with the provisions of the 1940 Act; and
WHEREAS, this Agreement has been approved in accordance with the
provisions of the 1940 Act, and the Sub-Advisor is willing to furnish such
services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is agreed by and between the parties hereto as
follows:
1. APPOINTMENT. The Advisor hereby appoints the Sub-Advisor to act
as sub-advisor with respect to the Trust and the Sub-Advisor accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. SERVICES OF THE SUB-ADVISOR. Subject to the succeeding provisions
of this section, the oversight and supervision of the Advisor and the
direction and control of the Trust's Board of Trustees, the Sub-Advisor will
perform certain of the day-to-day operations of the Trust, which may include one
or more of the following services, at the request of the Advisor: (a) acting as
investment advisor for and managing the investment and reinvestment of those
assets of the Trust as the Advisor may from time to time request and in
connection therewith have complete discretion in purchasing and selling such
securities and other assets for the Trust and in voting, exercising consents and
exercising all other rights appertaining to such securities and other assets on
behalf of the Trust; (b) arranging, subject to the provisions of paragraph 3
hereof, for the purchase and sale of securities and other assets of the Trust;
(c) providing investment research and credit analysis concerning the Trust's
investments, (d) assist the Advisor in determining what portion of the Trust's
assets will be invested in cash, cash equivalents and money market instruments,
(e) placing orders for all purchases and sales of such investments made for the
Trust, and (f) maintaining the books and records as are required to support
Trust investment operations. At the request of the Advisor, the Sub-Advisor will
also, subject to the oversight and supervision of the Advisor and the direction
and control of the Trust's Board of Trustees, provide to the Advisor or the
Trust any of the facilities and equipment and perform any of the services
described in Section 3 of the Advisory Agreement. In addition, the Sub-Advisor
will keep the Trust and the Advisor informed of developments materially
affecting the Trust and shall, on its own initiative, furnish to the Trust from
time to time whatever information the Sub-Advisor believes appropriate for this
purpose. The Sub-Advisor will periodically communicate to the Advisor, at such
times as the Advisor may direct, information concerning the purchase and sale of
securities for the Trust, including: (a) the name of the issuer, (b) the amount
of the purchase or sale, (c) the name of the broker or dealer, if any, through
which the purchase or sale is effected, (d) the CUSIP number of the instrument,
if any, and (e) such other information as the Advisor may reason ably require
for purposes of fulfilling its obligations to the Trust under the Advisory
Agreement. The Sub-Advisor will provide the services rendered by it under this
Agreement in accordance with the Trust's investment objectives, policies and
restrictions (as currently in effect and as they may be amended or supplemented
from time to time) as stated in the Trust's Prospectus and Statement of
Additional Information and the resolutions of the Trust's Board of Trustees.
3. COVENANTS. In the performance of its duties under this Agreement,
the Sub-Advisor shall at all times conform to, and act in accordance with, any
requirements imposed by:
(a) (i) the provisions of the 1940 Act and the Investment
Advisers Act of 1940, as amended (the "Advisers Act") and all applicable Rules
and
Regulations of the Securities and Exchange Commission (the "SEC"); (ii) any
other applicable provision of law; (iii) the provisions of the Agreement and
Declaration of Trust, as amended and restated, and By-Laws of the Trust, as such
documents are amended from time to time; (iv) the investment objectives and
policies of the Trust as set forth in its Registration Statement on Form N-2;
and (v) any policies and determinations of the Board of Trustees of the Trust;
in addition, the Sub-Advisor;
(b) will place orders either directly with the issuer or with
any broker or dealer. Subject to the other provisions of this paragraph, in
placing orders with brokers and dealers, the Sub-Advisor will attempt to obtain
the best price and the most favorable execution of its orders. In placing
orders, the Sub-Advisor will consider the experience and skill of the firm's
securities traders as well as the firm's financial responsibility and
administrative efficiency. Consistent with this obligation, the Sub-Advisor may
select brokers on the basis of the research, statistical and pricing services
they provide to the Trust and other clients of the Advisor or the Sub-Advisor.
Information and research received from such brokers will be in addition to, and
not in lieu of, the services required to be performed by the Sub-Advisor
hereunder. A commission paid to such brokers may be higher than that which
another qualified broker would have charged for effecting the same transaction,
provided that the Sub-Advisor determines in good faith that such commission is
reasonable in terms either of the transaction or the overall responsibility of
the Advisor and the Sub-Advisor to the Trust's and their other clients and that
the total commissions paid by the Trust will be reasonable in relation to the
benefits to the Trust over the long-term. In addition, the Sub-Advisor is
authorized to take into account the sale of shares of the Trust in allocating
purchase and sale orders for portfolio securities to brokers or dealers
(including brokers and dealers that are affiliated with the Advisor or the
Sub-Advisor), provided that the Sub-Advisor believes that the quality of the
transaction and the commission are comparable to what they would be with other
qualified firms. In no instance, however, will the Trust's securities be
purchased from or sold to the Advisor, the Sub-Advisor or any affiliated person
thereof, except to the extent permitted by the SEC or by applicable law;
(c) will maintain books and records with respect to the Trust's
securities transactions and will render to the Advisor and the Trust's Board of
Trustees such periodic and special reports as they may request;
(d) will maintain a policy and practice of conducting its
investment advisory services hereunder independently of the commercial banking
operations of its affiliates. When the Sub-Advisor makes investment
recommendations for the Trust, its investment advisory personnel will not
inquire or take into consideration whether the issuer of securities proposed for
purchase or sale for the Trust's account are customers of the commercial
department of its affiliates; and
(e) will treat confidentially and as proprietary information of
the Trust all records and other information relative to the Trust, and the
Trust's prior, current or potential shareholders, and will not use such records
and information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in writing
by the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Sub-Advisor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
4. SERVICES NOT EXCLUSIVE. Nothing in this Agreement shall prevent
the Sub-Advisor or any officer, employee or other affiliate thereof from acting
as investment advisor for any other person, firm or corporation, or from
engaging in any other lawful activity, and shall not in any way limit or
restrict the Sub-Advisor or any of its officers, employees or agents from
buying, selling or trading any securities for its or their own accounts or for
the accounts of others for whom it or they may be acting; provided, however,
that the Sub-Advisor will undertake no activities which, in its judgment, will
adversely affect the performance of its obligations under this Agreement.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Advisor hereby agrees that all records which
it maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any such records upon the Trust's request. The
Sub-Advisor further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act (to the extent such books and records are not maintained by the
Advisor).
6. AGENCY CROSS TRANSACTIONS. From time to time, the Sub-Advisor or
brokers or dealers affiliated with it may find themselves in a position to buy
for certain of their brokerage clients (each an "Account") securities which the
Sub-Advisor's investment advisory clients wish to sell, and to sell for certain
of their brokerage clients securities which advisory clients wish to buy. Where
one of the parties is an advisory client, the Advisor or the affiliated broker
or dealer cannot participate in this type of transaction (known as a cross
transaction) on behalf of an advisory client and retain commissions from both
parties to the transaction without the advisory client's consent. This is
because in a situation where the Sub-Advisor is making the investment decision
(as opposed to a brokerage client who makes his own investment decisions), and
the Sub-Advisor or an affiliate is receiving
commissions from one or both sides of the transaction, there is a potential
conflicting division of loyalties and responsibilities on the Sub-Advisor's part
regarding the advisory client. The Securities and Exchange Commission has
adopted a rule under the Advisers Act which permits the Sub-Advisor or its
affiliates to participate on behalf of an Account in agency cross transactions
if the advisory client has given written consent in advance. By execution of
this Agreement, the Trust authorizes the Sub-Advisor or its affiliates to
participate in agency cross transactions involving an Account. The Trust may
revoke its consent at any time by written notice to the Sub-Advisor.
7. EXPENSES. During the term of this Agreement, the Sub-Advisor will
bear all costs and expenses of its employees and any overhead incurred by the
Sub-Advisor in connection with its duties hereunder; provided that the Board of
Trustees of the Trust may approve reimbursement to the Sub-Advisor of the
pro-rata portion of the salaries, bonuses, health insurance, retirement benefits
and all similar employment costs for the time spent on Trust operations (other
than the provision of investment advice and administrative services required to
be provided hereunder) of all personnel employed by the Sub-Advisor who devote
substantial time to the Trust operations or the operations of other investment
companies advised or sub-advised by the Sub-Advisor.
8. COMPENSATION.
(a) The Advisor agrees to pay to the Sub-Advisor and the
Sub-Advisor agrees to accept as full compensation for all services rendered by
the Sub-Advisor as such, a monthly fee in arrears at an annual rate equal to 38%
of the monthly advisory fees received by the Advisor. For any period less than a
month during which this Agreement is in effect, the fee shall be prorated
according to the proportion which such period bears to a full month of 28, 29,
30 or 31 days, as the case may be.
(b) For purposes of this Agreement, the Managed Assets of the
Trust shall be calculated pursuant to the procedures adopted by resolutions of
the Trustees of the Trust for calculating the value of the Trust's assets or
delegating such calculations to third parties.
9. INDEMNITY.
(a) The Trust hereby agrees to indemnify the Sub-Advisor
and each of the Sub-Advisor's directors, officers, employees, agents, associates
and controlling persons and the directors, partners, members, officers,
employees and agents thereof (including any individual who serves at the
Sub-Advisor's request as director, officer, partner, member, trustee or the like
of another entity) (each such person being an "Indemnitee") against any
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and counsel fees (all as provided in
accordance with applicable state law) reasonably incurred by such Indemnitee in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
investigative body in which such Indemnitee may be or may have been involved as
a party or otherwise or with which such Indemnitee may be or may have been
threatened, while acting in any capacity set forth herein or thereafter by
reason of such Indemnitee having acted in any such capacity, except with respect
to any matter as to which such Indemnitee shall have been adjudicated not to
have acted in good faith in the reasonable belief that such Indemnitee's action
was in the best interest of the Trust and furthermore, in the case of any
criminal proceeding, so long as such Indemnitee had no reasonable cause to
believe that the conduct was unlawful; provided, however, that (1) no
Indemnitee shall be indemnified hereunder against any liability to the Trust or
its shareholders or any expense of such Indemnitee arising by reason of (i)
willful misfeasance, (ii) bad faith, (iii) gross negligence or (iv) reckless
disregard of the duties involved in the conduct of such Indemnitee's position
(the conduct referred to in such clauses (i) through (iv) being sometimes
referred to herein as "disabling conduct"), (2) as to any matter disposed of by
settlement or a compromise payment by such Indemnitee, pursuant to a consent
decree or otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless there has been a determination that such
settlement or compromise is in the best interests of the Trust and that such
Indemnitee appears to have acted in good faith in the reasonable belief that
such Indemnitee's action was in the best interest of the Trust and did not
involve disabling conduct by such Indemnitee and (3) with respect to any action,
suit or other proceeding voluntarily prosecuted by any Indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action, suit
or other proceeding by such Indemnitee was authorized by a majority of the full
Board of Trustees of the Trust.
(b) The Trust shall make advance payments in connection with the
expenses of defending any action with respect to which indemnification might be
sought hereunder if the Trust receives a written affirmation of the Indemnitee's
good faith belief that the standard of conduct necessary for indemnification has
been met and a written undertaking to reimburse the Trust unless it is
subsequently determined that such Indemnitee is entitled to such indemnification
and if the trustees of the Trust determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the Indemnitee shall provide a security for such
Indemnitee-undertaking, (B) the Trust shall be insured against losses arising by
reason of any lawful advance, or (C) a majority of a quorum consisting of
trustees of the Trust who are neither "interested persons" of the Trust (as
defined in Section 2(a)(19) of the 0000 Xxx) nor parties to the proceeding
("Disinterested Non-Party Trustees") or an independent legal counsel in a
written opinion, shall determine, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason to believe that
the Indemnitee ultimately will be found entitled to indemnification.
(c) All determinations with respect to indemnification hereunder
shall be made (1) by a final decision on the merits by a court or other body
before whom the proceeding was brought that such Indemnitee is not liable by
reason of disabling conduct, or (2) in the absence of such a decision, by (i) a
majority vote of a quorum of the Disinterested Non-Party Trustees of the Trust,
or (ii) if such a quorum is not obtainable or even, if obtainable, if a majority
vote of such quorum so directs, independent legal counsel in a written opinion.
All determinations that advance payments in connection with the expense of
defending any proceeding shall be authorized shall be made in accordance with
the immediately preceding clause (2) above.
The rights accruing to any Indemnitee under these provisions
shall not exclude any other right to which such Indemnitee may be lawfully
entitled.
10. LIMITATION ON LIABILITY.
(a) The Sub-Advisor will not be liable for any error of judgment
or mistake of law or for any loss suffered by the Advisor or by the Trust in
connection with the performance of this Agreement, except a loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its duties under this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the parties hereto acknowledge and agree that, as provided in Section
5.1 of Article V of the Declaration of Trust, as amended and restated, this
Agreement is executed by the Trustees and/or officers of the Trust, not
individually but as such Trustees and/or officers of the Trust, and the
obligations hereunder are not binding upon any of the Trustees or Shareholders
individually but bind only the estate of the Trust.
11. DURATION AND TERMINATION. This Agreement shall become effective
as of the date hereof and, unless sooner terminated with respect to the Trust
as provided herein, shall continue in effect for a period of two years.
Thereafter, if not terminated, this Agreement shall continue in effect with
respect to the Trust for successive periods of 12 months, provided such
continuance is specifically approved at least annually by both (a) the vote of a
majority of the Trust's Board of Trustees or a vote of a majority of the
outstanding voting securities of the Trust at the time outstanding and entitled
to vote and (b) by the vote of a majority of the Trustees, who are not parties
to this Agreement or interested persons (as such term is defined in the 0000
Xxx) of any such party, cast in person at a meeting called for the purpose of
voting on such approval. Notwithstanding the foregoing, this Agreement may be
terminated by the Trust or the Advisor at any time, without the payment of any
penalty, upon giving the Sub-Advisor 60 days' notice (which notice may be waived
by the Sub-Advisor), provided that such termination by the Trust or the Advisor
shall be directed or approved by the vote of a majority of the Trustees of the
Trust in office at the time or by the vote of the holders of a majority of the
voting securities of the Trust at the time outstanding and entitled to vote, or
by the Sub-Advisor on 60 days' written notice (which notice may be waived by the
Trust and the Advisor), and will terminate automatically upon any termination of
the Advisory Agreement between the Trust and the Advisor. This Agreement will
also immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meanings of such terms
in the 1940 Act.)
12. NOTICES. Any notice under this Agreement shall be in writing to
the other party at such address as the other party may designate from time to
time for the receipt of such notice and shall be deemed to be received on the
earlier of the date actually received or on the fourth day after the postmark if
such notice is mailed first class postage prepaid.
13. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. Any amendment of this Agreement shall be
subject to the 1940 Act.
14. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or other wise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding on, and shall inure to the
benefit of the parties hereto and
their respective successors.
15. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York for contracts to be
performed entirely therein without reference to choice of law principles thereof
and in accordance with the applicable provisions of the 1940 Act.
16. COUNTERPARTS. This Agreement may be executed in counter parts by
the parties hereto, each of which shall constitute an original counterpart, and
all of which, together, shall constitute one Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers designated below as of the day and
year first above written.
BLACKROCK ADVISORS, INC.
By:/s/ Xxxx X. Xxxxxxxx
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Name: Xxxx X. Xxxxxxxx
Title: Managing Director
BLACKROCK FINANCIAL MANAGEMENT, INC.
By:/s/ Xxxx X. Xxxxxxxx
----------------------------
Name: Xxxx X. Xxxxxxxx
Title: Managing Director
BLACKROCK PREFERRED OPPORTUNITY
TRUST
By:/s/ Xxxx X. Xxxxxxxx
----------------------------
Name: Xxxx X. Xxxxxxxx
Title: Secretary
